Employers work to ease cost of health overhaul

Six months from fully taking effect, President Barack Obama's main legislative achievement in attempting to expand access to health care is generating concerns locally.

By Bill ThompsonStaff writer

The 49ers are not just the team that lost the most recent Super Bowl.

That term and another — the 29ers — are fast becoming part of the jargon of economic analysts and business leaders as the Patient Protection and Affordable Care Act inches toward implementation.

Six months from fully taking effect, President Barack Obama's main legislative achievement in attempting to expand access to health care is generating concerns locally and nationally about its potential fallout.

The 49ers and 29ers refer to strategies that some companies are employing to avoid having to offer insurance to their workers under the Affordable Care Act, or ACA.

The law applies to companies with 50 or more employees, so some firms — the 49ers — are slashing their work forces to 49 or fewer. And many companies that can't get under the threshold are limiting their part-time workers to 29 hours a week — the 29ers — since only those who work 30 hours or more are considered full time and must be offered insurance benefits.

Hugh Dailey, president of the Ocala-based Community Bank & Trust, said he's become well acquainted with the terms after hearing the concerns of his customers and fellow business owners.

“I can't tell you how this all shakes out, but everybody is pretty tentative about health insurance.”

Proponents of the ACA defend the policy, saying the dire predictions are overstated.

“There has been a lot of conjecture about what people might do or could do, but this hasn't actually happened yet,” White House spokeswoman Tara McGuinness told Fox News on Friday.

“The gap between sky-is-falling predictions about the health law and what is happening is very wide.”

Research by the Kaiser Family Foundation, one of the nation's leading think tanks on health care policy, indicates that 61 percent of all U.S. companies in 2012 provided employer-funded health insurance.

A worker's odds of obtaining that were much better with a bigger company than a smaller one.

Kaiser reports that last year 98 percent of firms with 200 or more employees did offer health insurance, while only 61 percent with between three and 199 workers did so.

About 50 percent of very small companies — those with three to nine employees — provided health coverage, according to Kaiser.

The penalty provisions are aimed at “large” companies, defined as having 50 or more full-time employees.

The law considers employees to be full time if they work an average of at least 30 hours a week. Employer compliance is also determined by the prorated hours put in by part-timers.

For example, a company that has only 30 workers on the job for 30 or more hours a week would still be considered a big company under the ACA if it had 25 additional part-time employees who each put in just 25 hours a week.

If just one of those full-time workers obtains health coverage under the insurance-exchange system that will be set up in each state, thus qualifying for a tax credit to offset their insurance premiums, the employer would be socked with additional taxes under the Health Care Act.

The additional taxes amount to $2,000 a year for each employee, after allowing for the first 30 workers.

In other words, a company with at least 50 full-time employees would have to pay the penalty if one of its workers opts for the exchange program. The penalty applies whether or not the company already offers health insurance.

According to a May report by the Congressional Research Service, employers avoid the ACA's tax consequences if they have fewer than 50 full-time workers, their part-time employees enroll in the exchange system, or if their full-time workers qualify for public insurance programs.

Such publicly funded programs include Medicaid or the Children's Health Insurance Program, which is open to children whose families have incomes that are too high to qualify for Medicaid, yet cannot afford private insurance.

The CRS report notes that employees can generally qualify for the tax credit through the exchange if their income is up to four times the federal poverty level, which for a single individual means a salary between $11,490 and $45,960 a year.

To avoid violating those regulations, some companies are becoming “49ers” and “29ers,” keeping their staffs below 50 workers or holding them below 30 hours per week.

According to Laura Byrnes, spokeswoman for Workforce Connection, the local employment agency, Marion County has 11,877 employers with 50 or fewer workers.

That total includes government agencies of every stripe as well as the private sector.

Overall, Byrnes said, the community has about 14,200 employers — so roughly 84 percent of all employers in Marion County are below the ACA's tax threshold.

Some trends suggest the critics' fears are not occurring, or at least are not yet coming to fruition.

Byrnes said Workforce Connection's data indicates that 21 percent of the help-wanted solicitations posted online with the agency in May 2012 were for part-time employment. Last month that figure had dipped to 18 percent.

State labor officials tracked similar results statewide and regionally, she added.

“Full-time jobs have been trending upwards with concomitant drop in part-time vacancies,” Byrnes said in an email.

A U.S. Department of Labor report on the retail industry noted that, on average, workers toiled 30.3 hours a week in May, which was down from the 30.5 hours in May 2012.

A second report pointed out that in the first quarter of 2013 employer spending for benefits for all workers and those in the service industries was up 1.5 percent and 1.2 percent, respectively, over the first three months of 2012.

Matthew Dotson, a Labor Department economist, said each increase was the smallest in these categories since the fourth quarter of 2009.

Kevin Sheilley, president and CEO of the Ocala-Marion County Chamber and Economic Partnership, said he believes the ACA will affect mostly mid-sized companies locally, meaning those with between 50 and 300 employees.

Those employers, he said, struggle with not just the cost that might be incurred, but also puzzling over the law's mandates about how much and what type of coverage they must provide.

That has led to dilemmas such as whether to hire one full-time worker or two part-timers, Sheilley added.

While employers will experiment to find the right balance once the law takes effect, he predicted that part-timers would eventually see their hours cut.

Community Bank's Dailey already has a feel for the impact.

The banker provides health insurance to 118 workers in three counties. They are covered through an insurance pool of several firms that combined pay to insure 3,000 workers.

If the ACA leads smaller companies to opt out of the pool, the premiums paid by the remaining members would jump, he said. Dailey added that his insurer has told him the price hike could be as much as 25 percent.

That would not only drive up his cost, he said, but also increase how much his employees contribute toward the policy.

Moreover, Dailey said the increased overhead would likely affect hiring decisions if the bank wanted to expand, meaning fewer jobs, even at entry-level pay rates.

“That's why we have the unemployment rates that we do, and what makes the unemployment rate go in the wrong direction,” he said.

But the implications for smaller companies are significant as well.

Clairson Plastics in Ocala has fewer than 50 employees, but CEO Dave Donihue projects an uptick in sales in the coming years that will present an opportunity to expand his workforce. Clairson makes injection-molded plastic components for consumer industries as well as the medical, defense and aerospace fields.

“When I get close, I'm going to put a pencil to it and decide whether I can afford to expand,” Donihue said. “I think that's terrible. It's not right. We're here to make money and provide jobs. If we can't make money, we can't provide jobs, pure and simple. And we can't raise our prices. We have competition.”